This Journal will focus mostly on volatility trading by structuring option spreads according to volatility differences across the volatility surface, my volatility outlook, and of course the expected direction of the underlying. I will often partially hedge my equities related position delta either directly, or indirectly, as in the case of multiple equities positions, using MES futures or ES options spreads based on my directional confidence and desire to increase net theta and net vega contribution to total returns. I will use a combination of macro and technical inputs as a basis for my directional outlook. Starting account value will be about $75k. Money management per position will be initially 1%. Trading instruments will be futures, ETFs for volatility and crypto, and stocks for longer term positions. Growth, defensive, small capitalization, and monetary themes will be considered for capital allocation purposes, but this is still a work in progress as my dynamic hedging strategy should allow reasonably safe high concentrations of capital to relatively few trading ideas.
Looking forward to the journal. I don't know much about options, so this will be very educational. Can you share a bit about your trading background. Best of luck to you!
I am a retail trader who works a full time job. I have had discipline problems in the past that have caused me to become too conservative in my trading. I lost 3% of account value concentrated in a few trades. I funded the account this journal is based on in February of this year. It is slightly above breakeven, benefitting mainly from some calendar spreads. Thank you for the well wishes.
Trying to assess the macro environment is tough right now. Our economic cycle may be in the late stage of expansion as suggested by rapidly increasing prices, including commodity based equities performance. Demographic inputs are mixed with pent up consumer energy potentially being realized now that the worst of Covid may be behind us. However, based on some personal observations, it seems people are becoming complacent suggesting that productivity gains may plateau. Our geopolitical situation will increase costs in the short term and reduce global market size potential in the long term for multinational companies. However, I assume the Ukraine situation will be resolved fairly quickly with an eventual return to most previous trade arrangements. The spot trucking load availability dropped by 30% from it's recent January all time peak, but recovered 10% this week, probably related to recent events. Seasonally, the volatile trucking spot freight market tends to strengthen during the Spring. Speaking of Spring, before Ukraine was invaded, I heard that a major airline was expecting a big 97% capacity utilization during Spring break. Many manufactured items still have considerable backlogs. However, China reduced their GDP growth projection last week while their market underperforms apparently because of developer debt stress. The creation of restrictions on foreign investment seems like a policy blunder, especially for a country with ambitions of global leadership. Equities markets are in a clear downtrend with the recent daily highs not able to make much progress over the previous day's high. Friday's price action saw the previous day's low taken out with a midrange close for a potential downtrend resumption. On SPY, Fridays entire session traded below the yearly average price. Risk seems high and higher interest rates change adversely affect valuation models while leveraged companies have higher interest expense, especially those with "Front-loaded" balance sheets. However, I expect economic growth rates to remain robust, with expectation of increased infrastructure orders from the Middle East, increased capital investment from energy companies, and the effects of the US spending bill becoming increasingly felt. I will be looking for confirmation that Europe and the US are committed to ensuring their energy independency and allocate funds accordingly. Stocks appear to be on sale and am open-minded for the month of March to close positively. Volatility levels for equities are generally in the 90th percentile, making option strategies that are net short premium tempting. Term structure is inverted on SPY, creating an interesting opportunity in calendar spreads, even if prices rise and volatility falls somewhat, assuming IV returns to contango. Will be running some scenarios this weekend. Conclusion: I will be a buyer of one month to six week bull spreads on positive market momentum. A wide fly may be better, especially if we end up in a trading range and this spread will benefit from lower implied volatility. On negative market momentum, I will buy short term, 2 days to 2 weeks, calendar and diagonal spreads on ES.
No skanks for me. I’m thinking RRY16. Outside chance Destriero. Speaking of truck-stops: This was in lower priced Texas yesterday. Was going to post this photo in politics. Bone dry to full for me is 300 gallons. A similar truck-stop in Southern California is charging $5.959 retail, so over $1750 for a fill-up there. Hauling heavy flatbed loads in mountainous terrain in Winter would require me to fill up every other day. Now if I ever learned to trade… or at least performed half as well as my high school days… I could get finally get that diesel smell out of my clothes. For another life. Edit: Monobrow trading? Odds this is a new nick for destriero is higher.
Hopefully don't mind me taking the liberty to post a comment in your journal. If it's not welcomed just let me know and I'll remove or refrain from ever posting here again. Was just going to comment that looking back at the data, generally 7-11 trading days is the max we tend to stay in this type of range on the Daily chart (under this scenario / setup) we're currently at 7 trading days from how I am counting it. So increased probability we get that larger expansion move any day now, am on the look out for it.
Feel free to post here. Sounds like you use NR7 / NR 11 days that Linda Raschke has discussed. Reminds me of an adage, enter when it is quiet, exit when it is wild. Given recent action, “Relatively speaking” applies here. Then again, so might using a shorter time frame.